Indian Airlines Wary Of Other Airlines & #8217; Call To Raise Insurance Surcharge

Indian Airlines is exercising a fair degree of caution to a call from other domestic airlines for a combined effort towards increasing per ticket insurance surcharges, fares on the lucrative routes and cutting commission rates for the ticket agents.

Senior Indian Airlines executives told Business Standard that the brass at Jet Airways had recently approached IA pushing for a concerted effort to slash commission rates for ticketing agents by 2 per cent. A top Jet executive asked Indian Airlines to take the lead in slashing the rates so that the private airline could follow suit, they said. The national carrier, however, has decided not to jump the gun and immediately slash the rates. "We cannot trust any other airline in the given circumstances. If they do not follow suit, we would lose a lot of business," a top IA executive said. IA is losing close to Rs 20 crore a month as it is carrying 2,200 fewer passengers a day in the aftermath of the September 11 events. Airlines can save up to Rs 200 crore annually from reducing agency commissions by 2 per cent.

When contacted, Jet Airways official spokesperson denied that Jet had approached IA for a joint cut in either airfares or commission rates for agents. The spokesperson, however, said that the airline was pursuing several cost-cutting measures in response to the shrinking demand for air-travel independently of other airlines.

In response to a faxed questionnaire, Jet said, "in the light of the additional insurance costs, the level of surcharge currently applicable is under review. Jet Airways is actively looking at various measures to cut costs including salary cuts and management of its non-essential expenses to offset the reduction in revenues as a result of the decline in traffic volumes." The private carrier, however, did not comment if it had indeed approached IA in the faxed reply.

IA executives, however, maintain that Jet Airways has time and again approached them for coordinated readjustments in airfares as well. Jet executives, on the other hand, allege that IA can afford to offer low fares despite lower yields since it is a public sector unit.